Threats and opportunities facing retail pharmacy
One of the key tools that retail pharmacies have at their disposal are their loyalty programs and mobile apps, said Amar Singh, senior director at business consulting and analytics firm Kantar.
“They are themselves telehealth delivery centers, for both physical and mental health,” he said of the mobile apps of chain pharmacies such as CVS and Walgreens.
Customers can use the apps to set health and wellness goals, manage chronic conditions, schedule deliveries and more, as well as access their loyalty membership benefits.
“The apps have become resource centers, and the strength of the ecosystem is amplified through their media networks as well,” said Singh, referring to the digital advertising platforms that retailers can offer to product vendors. “The apps have become healthcare resources for consumers, and that’s how retailers are going to keep their core shoppers engaged and keep them in the fold, and also provide services.”
Mobile apps can also help retailers personalize their communications with their customers, and cross-promote products based on shopping history. That is an area that is gaining increasing traction through the increasing sophistication of machine learning and artificial intelligence, said Singh.
Rodey Wing, a partner in the health and retail practices of global strategy and management consulting firm Kearney, agreed that loyalty programs are most effective at engaging the existing customer base, and keeping them engaged.
“It's really a customer retention program, and it's an opportunity drive a bigger basket,” he said.
He said that while retail drugstores do “an OK job” with their loyalty programs, other segments of retail have done more to optimize the opportunity that a strong rewards program can provide.
“I think the primary challenge with the loyalty programs that we see in pharmacy is that they're not designed to be really engaging programs,” said Wing. “They're not something that’s super top of mind for the customer, which is why I think they struggle to drive traffic and certainly struggle to really bring in the customers that are not already in their direct orbit.”
Independent retail pharmacies can compete with anyone—provided there’s a level playing field, said Kurt Proctor, senior VP of strategic initiatives at the National Community Pharmacists Association.
“It's when PBMs or others are forcing pharmacies out of network or making economics difficult for them—that's when the challenges arise,” he said. “When insurance company PBMs own their own pharmacies and are directing that business, then that certainly is a big challenge for all pharmacies, including independents.”
Proctor said online pharmacies, such as Mark Cuban Cost Plus Drugs, which are offering a limited number of mostly generic drugs at low prices, could disrupt the market to some degree, but more importantly they shine a spotlight on the economics of the pharmacy business in the U.S.
“Hopefully independent pharmacies will be in a position to capitalize on some of that disruption in the marketplace,” he said.
The COVID pandemic, meanwhile, helped highlight the critical role that local community pharmacies, pharmacists and pharmacy technicians play, particularly in underserved rural and urban communities. Payors have seen the value that local pharmacies can provide, said Proctor, and they come to expect them to provide more services, such as testing, prescribing birth control, pharmacogenomics and immunizations.
“Independents are very, very well-positioned to help with that,” he said. “They’re positioned well to help health plans deal with the different metrics that their performance is measured on, and they're closing healthcare gaps.”
NCPA created the CPESN clinically integrated network to help independents leverage the potential competitive advantages that come with broadening the scope of their practice and demonstrating the benefits they can provide in terms of patient outcomes and healthcare savings.
When it comes to competing with online pharmacy players, independents also have the experience on their side. In addition, many independents have been making their other HBC offerings available online, and have been partnering with technology vendors to ramp up their e-commerce capabilities to meet the demands of those customers who prefer to shop online.
“The problem comes when patients are forced to use one pharmacy or one channel against what is really their own consumer will,” said Proctor.